Future of Discos: Govt advised to take stakeholders into confidence

ISLAMABAD: The country’s prime intelligence agency has reportedly proposed to the government to take all relevant stakeholders on board in deciding the future of power Distribution Companies (Discos) to ensure a transparent, successful and sustainable transition, well informed sources in Finance Ministry told Business Recorder.

The Intelligence Agency, which played a key role in renegotiation of Agreements with Independent Power Producers (IPPs) and deal with Turkish company M/s Karkey, has offered its comments on the caretaker government’s endeavors to find out a solution for the financially bleeding Discos. Presently, annual financial loss of Discos is around Rs600 billion on account of losses and under recovery.

The successive governments have been working on different proposals to find out a sustainable solution of Discos. Three proposals are under active consideration, .i.e., privatisation, provincialisation and handing over of management control to the private sector.

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The prime Intelligence agency is of the view that the success of the Provincial Governments in managing Discos will depend on their capacity to effectively execute their responsibilities, allocate adequate resources and establish transparent and accountable mechanisms for governance and operations.

In order to attain desired output from Discos to respective provinces, following challenges are anticipated which requires timely effective tackling: (i) in case of transfer of circular debt from federal government to provincial governments, it will lead to burden on the provinces that already have lower capacity of revenue collection, which may impinge upon their financial viability; (ii) Generation Companies (GENCOs) are still in the ownership of federal government; hence the capacity of Discos to purchase power from federal setups will create liabilities between provinces and federal government, needing real time attention; (iii) this will lead to disparity in electricity rates in various provinces as the authority for subsidies would lie with provinces, possibility of giving rise to political expediency too; (iv) Islamabad Electric Supply Company (IESCO) will stay with the federal government, yet it supplies power to many regions of Punjab, creating dependence on Punjab government’s capacity of revenue collection and possible accumulation of over dues and; (v) the capacity of provincial governments especially in provinces like Sindh and Balochistan may be very limited to effectively deal with this new function.

The federal government may need to make necessary arrangements in advance to build capacity of the provinces by providing requisite training, expertise and even manpower to ensure success of the whole concept/ reform.

The prime intelligence agency has recommended that to ensure swift transition of Discos to provinces and their successful operationalisation, it is crucial for the federal government to take all stakeholders onboard.

“By involving all relevant stakeholders in the decision making process, the government can incorporate diverse perspectives and mitigate the potential future challenges. This approach will foster transparency, address concerns and promote a more successful and sustainable transition,” the sources quoted the Agency as saying in its recommendations.

However, Privatisation Commission is of the view that there is lack of clarity for decision makers and Power Division on transaction structure and way forward.

Privatisation Commission has proposed to the government that with the transfer of Discos to the provinces, the decision on uniform tariff regime may also be revisited as presently inefficiencies of few Discos are being cross-subsidized either by the federal government or through further burdening the already paying consumers of other Discos.

Copyright Business Recorder, 2023